AboutJohn D Smith, CFP Expertise I can answer detailed questions regarding mutual fund investing, retirement planning, education planning and related financial planning/investment issues. I have a B.S. degree in Financial Planning & Counseling. I am also a Certified Financial Planner practitioner and have performed fee only investment management and financial planning services for the past 11 years.
Question What are the pros and cons of just throwing all of my allocation into an Index fund such as a fund that mimics the S&P 500?
Thanks.
Answer I agree with the philosophy of using index funds since over time active managers have a tough time beating their benchmark. However, limiting yourself to the S&P 500 causes you to miss out on other parts of the market that may perform better during different time periods. In my opinion, Small US stocks and international stocks are crucial to a diversified investment portfolio. Actually, small caps and international have both outperformed the S&P 500 by a wide margin over the past 5 years. For more information on mutual fund investing and the importance of diversification, I would visit www.vanguard.com. Enter the personal investors portion of the website and go to the planning and advice tab. There is good information here. I hope this helps.
